Comparing the Liquidity of Common FDIC Insured Investments

Business cash management and liquidity depicted by cash swirling around a businessperson on a city street.

Businesses that maintain a large sum of reserve cash need an investment that provides safety and liquidity. Some of the most common cash investment vehicles are checking accounts, savings accounts, money market accounts, and Certificates of Deposit. All these investments are covered by the FDIC up to the $250k limit per ownership category, but their liquidity can vary significantly. By understanding these differences, you can choose the right investments for your business.

Checking Accounts Are Highly Liquid

Business checking accounts are traditionally used for day-to-day expenses. For this reason, they don’t have a maximum number of transactions or early withdrawal penalties, making them the most liquid type of FDIC insured account.

Since checking accounts are intended for frequent use, banks typically include many features that make it simple for businesses to access their cash. These can include check writing privileges, online transfers, and even automated bill payments.

Savings and Money Market Accounts Offer Moderate Liquidity

Businesses often use savings and money market accounts to set aside funds for the future while keeping that cash accessible in the meantime. These accounts don’t typically charge a fee for transfers or withdrawals, but transactions can be limited.

Prior to the passage of Regulation D in 2020, banks were forced to adhere to a six-transfer limit per statement period for savings and money market accounts. Regulation D allowed banks to eliminate this limit but did not force them to do so. Today, some banks still impose a limit on the number of transfers from a savings or money market account while others do not.

Certificates of Deposit Offer Managed Liquidity

Certificates of Deposit [CDs] are often used to invest money earmarked for the future. These are generally funds that do not need to be accessed in the short term. CDs are also called ‘term deposit accounts’ because they require depositors to leave their funds invested for a set period before withdrawal.

CD terms range from one month to multiple years. At the end of the term, the funds are available for reinvestment, withdrawal, or transfer to another type of account. Liquidity for CDs is limited by penalties for accessing the funds before maturity.

How does liquidity impact returns?

Additional liquidity provides more options for businesses to access and use their cash. On the other hand, highly liquid accounts offer fewer options for banks to lend or invest deposits.  That’s why banks typically pay a higher yield for accounts with lower liquidity. Because of the higher returns, businesses often opt for the least liquidity they can tolerate.

Across the banking industry, returns can vary greatly for similar accounts due to factors like  geography and individual bank needs. For this reason, businesses looking to optimize returns must monitor rates from banks across the country to achieve the most competitive rate. However, this process can be time consuming. Fortunately, fintech makes it simple for businesses to capture nationally competitive rates along with extended safety and liquidity to meet their needs.

Safety, Liquidity, and Returns with AMMA™ by ADM

With traditional deposit accounts, businesses are limited to $250k in FDIC coverage per account ownership category at each insured bank. Our company, the American Deposit Management Co. [ADM] uses proprietary fintech to spread business cash across a nationwide network of banks and credit unions. We call this concept Marketplace Banking™ and it allows our clients to access virtually unlimited FDIC / NCUA protection. Fortunately for businesses, the financial institutions in our network compete for deposits – which allows us to also provide access to nationally competitive returns.

Our American Money Market Account [AMMA™] provides twice-weekly liquidity, comparable to traditional savings and money market accounts. For companies with a longer time horizon, we also offer term deposit options including CDs and CD ladders. Both of these products provide access to extended safety and nationally competitive returns. We achieve all of this with one account and one consolidated monthly statement.

To learn more and get started today, contact us.


*American Deposit Management Co. is not an FDIC/NCUA-insured institution. FDIC/NCUA deposit coverage only protects against the failure of an FDIC/NCUA-insured depository institution.

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